Monday, March 09, 2009

World Bank uses the word "recession"

Some very scary figures being cited by the World Bank today. The bank released a report ahead of a major summit of finance leaders to inform them of the depth of the world economic crisis.

The World Bank is warning that the economic needs to bail the world out of the recession could exceed the resources of the international banks. The bank calls on world leaders to contribute 0.7 percent of their gross domestic product to a "vulnerability fund" The fund would be set up for countries without the resources to bail themselves out.

From this Associated Press story that we found in Oregon's Mail Tribune writer Anthony Faiola explains what is in the World Bank report.

The report said that 94 out of 116 developing countries have been hit by economic slowdowns. Net private capital flows to emerging markets are plunging, set to fall to $165 billion this year — or 17 percent of their 2007 levels. Falling demand in the West is sparking the sharpest drop in world trade in 80 years, sending sales of the products and commodities of poorer nations spiraling down, the report said.

That decline is touching off a wave of job losses. Cambodia has lost 30,000 jobs in the garment industry. In India, more than half a million jobs vanished in the last three months of 2008, including cuts in the gems, jewelry, auto and textile industries, according to the World Bank.

As a result, the report estimates that at least 98 countries may have problems financing at least $268 billion in public and private debt this year. It noted a worsening in market conditions could raise that figure as high as $700 billion.

Additionally, only one quarter of vulnerable developing countries, the World Bank said, have the ability to launch their own stimulus programs or to independently finance measures such as job-creation or safety-net programs.

To help them, multilateral lenders will need to dig deep. The World Bank remains well financed and is positioned to almost triple spending to $35 billion this year. But it warned the scope of the need in the developing world will exceed the combined ability of major multilateral lenders, and it called on governments in major nations and the private sector to pitch in more.

For instance, its sister organization, the International Monetary Fund, recently received $100 billion more from Japan, but is still asking more affluent nations to come up with an additional $150 billion to replenish its rapidly diminishing funds. While the World Bank aims to reduce global poverty largely through long-term projects in the developing world, the IMF is charged with offering bigger, more immediate bailouts to countries on the verge of economic collapse. The list of countries fitting that description has soared in recent months.